Internet advertising is a large and rapidly growing industry. eMarketer Daily has calculated that the market for online advertising reached $21.4 billion for 2007, and projected that revenues will hit $42 billion by 2011, a compound annual growth rate of 15 approximately 18.4 percent.
As ad spending increases, there has been continued investment in techniques to deliver more targeted advertising and displaying advertisements that better match end user's own interests. This makes advertisements more useful to the viewer, while increasing click-through rates, conversion, and corresponding profitability for advertisers.
However, there has been increasing concern over the privacy implications of current techniques for tracking and targeting. Recently, new legislation has been introduced in the United States and Europe to try to control data that web servers are collecting from users in order to deliver more targeted advertisements.
Currently, targeted advertising is done primarily using “cookie” technology, which works by passing a token, known as a cookie, from web server to web browser upon the browser's first visit to the site. This token is returned by the browser to the server every time a user clicks a new link within the same domain. This simple technology allows web servers to maintain detailed logs of “who went where” on their sites.
Current targeted advertising sifts through past content that was displayed to a user, and displays advertisements based not only on the current page content, but also on the user's past browsing history. This concept has been further extended, with companies now consolidating web browsing history across sites. Though historically Yahoo.com only had access to a user's browsing history under the Yahoo.com domain name, other companies have begun assembling a portfolio of this history across many different sites. In turn, these companies can sell the information to other websites and other interested parties. For instance, LLbean.com not only knows that someone has viewed a green sweater on their site, but also that that person has been viewing advertisements on eBay for golf clubs. So, LL Bean would be more likely to show that person a golfing shirt than it otherwise would have.
In addition to privacy concerns surrounding the current state-of-the-art, this solution leaves significant targeting opportunities untapped. It also does not have access to the richer targeting data that is on a customer's own local computer, which may better guide decisions about what advertisements are relevant. But because of the level of concern even on server-side targeted advertisements, current computing users would be hesitant to install local software that could divulge sensitive personal information to the outside world.